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The Biggest Oversight Financial Advisors are Making for their Future

By ClientWise | October 11, 2014

We work with a lot of financial advisors who are in a building phase for their businesses. If anything, they are preparing to join existing financial advisory teams, or perhaps considering partner with their peers, certainly not thinking about the eventual sale of their business. 


This is a big oversight: No matter what phase of business you are in, if you lead your own financial advisory practice you should be seriously considering the sale of your business as it relates to its enterprise value and your own succession planning.


Why? Because the opportunities for financial advisors at the end of their careers has increased significantly over time, and it’s important to not only have a grasp on the options available to you, but to also understand how this impacts the decisions you’re currently making. Considering the following ways you could potentially transition out of your business:


  • Selling to a bank for a roll-up company

  • Selling externally to a peer or fellow advisor

  • Selling externally, on a piecemeal basis in a partial book sale, which stretches out the sales period incrementally for anywhere from 3-10 years

  • Selling all-at-once to an internal buyer such as a partner, junior partner, employee, or family member

  • Selling incrementally to an internal buyer

Now, what does succession planning and enterprise value have to do with all of this? Well, for one, in each of these scenarios your business is evaluated in a variety of ways, all which change depending on the perspective of the potential buyer. As someone currently in the building phase of your practice, you might not be in a position to know the course of your future selling opportunity of those listed above now, but you are in a position to proactively address the elements that will eventually impact each of these opportunities, and (bonus) positively impact your business in the present while doing so!


Access to information is so much more prevalent now, which allows sellers (and therefore buyers) to understand the success of a practice in a variety of ways. So if you are in the 2-3 percent of advisors who are actively thinking about how their succession planning is impacting their enterprise value, then you are going to be ahead of the game when it comes to dealing with potential sellers. Luckily, the things that motivate both internal and external sellers, are directly impacted by your ability to do the the following:


  • Think like a CEO by acting as a leader of your business, not a participant in it.

  • Run a business, not a practice, by engaging in the principles we teach in our Building The Billion Dollar Business™ workshop. 

  • Create processes around the 7 key components of your business. 

  • Replicate and scale these processes to cater to clients with different needs who require varying levels of service.

  • Leverage the additional knowledge that is provided to you through technology and increased access to information. 

  • Allow your team members to feel like owners by involving them in the vision of your business and potentially giving them equity ownership.

  • Make sure your business does not lose sight of the ultimate stakeholder: The client.

Keep in mind that enterprise value is about much more than a strictly economic assessment of one’s business. It’s about taking into account the wisdom and value that you as the founder bring to your business, and how this is naturally replicated by you and your team members as your firm grows. Whether you plan to sell now or in the future, externally or internally, all of the elements above will eventually factor into the valuation of your business.


Coaching questions from this article:

  1. What is your objective for your business once you retire or are no longer able to run it?

  2. Do you have the human capital in place to carry on the vision and mission of your business, with the needs of future generations and economic changes in mind?

  3. Have you fully considered the business decisions that need to be made separate from the day-to-day operation of your business in order to prepare it for its next phase?


Building the Billion Dollar Business


Topics: Business Development Leadership Succession Planning

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